The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNIVERSITY DERMATOLOGY AND
VEIN CLINIC, LLC AND ST. JOSEPH
DERMATOLOGY AND VEIN CLINIC,
PLLC, Case No. 22-cv-00379
Plaintiffs, Judge Mary M. Rowland
v.
CERNER HEALTHCARE
SOLUTIONS, INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
Defendant Cerner Healthcare Solutions, Inc. moves the Court under Federal Rule
of Civil Procedure 12(b)(3) and the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, to
dismiss Plaintiffs’ Complaint based on the parties’ arbitration agreement.
Alternatively, Cerner requests that the Court transfer the suit to the United States
District Court for the Western District of Missouri under 28 U.S.C. § 1406. For the
reasons stated herein, Cerner’s motion [10] is denied without prejudice. Plaintiffs’
motion for reconsideration regarding the order on motion for leave to file and to strike
[24] is denied without prejudice as moot.
I. Background
In this case, Plaintiffs University Dermatology and Vein Clinic, LLC (UDVC) and
St. Joseph Dermatology and Vein Clinic, PLLC (SJDVC), plead claims against Cerner
for breach of contract, negligence, and participation in breach of trust. (Compl., Dkt.
1-1). Plaintiffs allege that their suit arises from “Cerner’s breaches of duties owed to
UDVC and SJDVC as their electronic health records provider” because Cerner
allowed third parties to access Plaintiffs’ patient electronic medical records. (Id. p.1).
Vassilios A. Dimitropoulos, M.D. is the majority member interest holder and
manager of both UDVC and SJDVC. (Id. ¶¶ 1–2). Before 2016, Dimitropoulos and
Clarence W. Brown, Jr. were the principal owners of a medical dermatology practice
providing services through two entities, University Dermatology (Corp.) and St.
Joseph’s Dermatology, LLC (referred to as the “Pre-2016 Practice”). (Id. ¶ 5). Cerner
“was a supplier of health care information technology solutions and tech-enabled
services” to medical practices. (Id. ¶ 6). Cerner provided the Pre-2016 Practice with
all of its clinical, financial and operational technology needs, through contracts
entered into with St. Joseph’s Dermatology, LLC. (Id. ¶ 7).
In May 2016, Brown filed a dissolution action in Michigan against several
defendants including Dimitropoulos and University Dermatology (Corp.) and St.
Joseph’s Dermatology, LLC. (Id. ¶ 8). Not long after, Brown set up competing
dermatology practices in Michigan and Illinois. (Id. ¶ 9). In September 2016, the
Michigan court entered an order appointing a receiver and requiring the Pre-2016
Practice entities to cease operations. (Id. ¶¶ 10–12). In November 2016, the
receivership property was sold at an auction. (Id. ¶¶ 13–14). Dimitropoulos was the
successful bidder for all of the non-real property originally owned by the Pre-2016
Practice. (Id. ¶ 14). Pursuant to the sale, the business assets, including all patient
records of the Pre-2016 Practice, transferred to UDVC and SJDVC. (Id. ¶ 18). UDVC
asked Cerner for a new medical practice system similar to the Cerner system used by
the Pre-2016 Practice. (Id. ¶ 21). Instead of doing this, Plaintiffs allege, Cerner
continued the Pre-2016 Practice medical practice system, merely changing the
ownership and billing of the system to UDVC. (Id. ¶ 22). This failure, Plaintiffs claim,
gave Brown and his agents unauthorized access to all of UDVC’s medical practice
records for both the pre-2016 Practice and Dimitropoulos’ new dermatology practices.
(Id.) Brown sought these records to compete with Dimitropoulos and steal or attempt
to steal patients, and Cerner benefited by earning significant fees from Brown. (Id.
¶¶ 26, 27, 29). Dimitropoulos discovered the unauthorized access in 2017, and later
discovered that Cerner was charging UDVC for services that had been ordered by
Brown, not UDVC. (Id. ¶¶ 30, 32). In 2020, UDVC nevertheless paid Cerner to avoid
business disruption, and at that time, requested expiration dates for “all purported
Cerner contracts.” (Id. ¶ 33). UDVC found a new provider, and subsequently
“requested that Cerner cancel all services except for one provider to be able to access
to Specialty PM service”; Cerner did not respond and instead continued its excessive
billing. (Id. ¶¶ 34, 35).
Plaintiffs claim that Cerner’s failures “under the oral and/or written contracts
with UDVC constitute material breaches of the contracts.” (Id. ¶ 45). And “[a]s a
direct and proximate result of Cerner’s breaches of the contracts, UDVC and SJDVC
have been damaged in an amount to be proven at trial in excess of $300,000. . . .” (Id.
¶ 49). Plaintiffs seek a “declaration that any and all contracts with Cerner are null
and void and that UDVC and SJDVC owe Cerner no further fees and costs pursuant
to those contracts. . . .” (Id. p. 13).
On December 1, 2021, Plaintiffs filed this suit in state court. On January 24, 2022,
Cerner removed the case to this court, and thereafter filed the instant motion. [10];
[11]. In its motion, Cerner argues that the parties’ contract contains a mandatory
arbitration agreement which the Court must enforce.
II. Standard
Under the Federal Arbitration Act (“FAA”), “[a] written provision in . . . a contract
. . . to settle by arbitration a controversy thereafter arising out of such contract . . .
shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. The Act “mandates that
district courts shall direct parties to proceed to arbitration on issues as to which an
arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S.
213, 218 (1985). It reflects a “liberal federal policy favoring arbitration agreements,”
AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011) (quoting Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), and places “arbitration
agreements on an equal footing with other contracts,” Gore v. Alltel Comm’ns, LLC,
666 F.3d 1027, 1032 (7th Cir. 2012) (quoting Concepcion, 563 U.S. at 339). The FAA’s
policy favoring arbitration “is to make ‘arbitration agreements as enforceable as other
contracts, but not more so.” Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1713 (2022)
(quotation omitted).
“When deciding whether parties agreed to arbitrate a certain matter, courts
generally should apply ordinary state-law principles that govern the formation of
contracts.” Druco Rest., Inc. v. Steak N Shake Enterp., Inc., 765 F.3d 776, 781 (7th
Cir. 2014). “Whether enforcing an agreement to arbitrate or construing an arbitration
clause, courts and arbitrators must give effect to the contractual rights and
expectations of the parties.” Smith v. Bd. of Directors of Triad Mfg., Inc., 13 F.4th
613, 619 (7th Cir. 2021) (cleaned up).
Under the FAA, in response to an opposing party’s refusal to arbitrate despite a
written agreement for arbitration, a party “may petition any United States district
court . . . for an order directing that such arbitration proceed in the manner provided
for in such agreement.” 9 U.S.C. § 4. The party seeking to compel arbitration bears
the burden to show an agreement to arbitrate. Id.; see A.D. v. Credit One Bank, N.A.,
885 F.3d 1054, 1063 (7th Cir. 2018). “The court may consider exhibits and affidavits
regarding the arbitration agreement in question.” Friends for Health: Supporting N.
Shore Health Ctr. v. PayPal, Inc., No. 17 CV 1542, 2018 WL 2933608, at *3 (N.D. Ill.
June 12, 2018). Once the moving party makes its initial showing, the party resisting
arbitration bears the burden of identifying a triable issue of fact on the purported
arbitration agreement. See Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002).
The resisting party’s evidentiary burden is like that of a party opposing summary
judgment. Id. “[A] party cannot avoid compelled arbitration by generally denying the
facts upon which the right to arbitration rests; the party must identify specific
evidence in the record demonstrating a material factual dispute for trial.” Id. As with
summary judgment, the court views the evidence in the light most favorable to the
nonmoving party and draws reasonable inferences in its favor. Id. If the party
opposing arbitration identifies a genuine issue of fact as to whether an arbitration
agreement was formed, “the court shall proceed summarily to the trial thereof.” Id.
(quoting 9 U.S.C. § 4).
III. Analysis
A party seeking to compel arbitration must demonstrate: (1) an enforceable
written agreement to arbitrate; (2) a dispute within the scope of the arbitration
agreement; and (3) a refusal to arbitrate. A.D., 885 F.3d at 1060. The only issue here
is whether there is an enforceable agreement to arbitrate.
Plaintiffs dispute that “there is a valid and enforceable contract between one or
both of plaintiffs and Cerner that requires arbitration.” (Dkt. 17 at 2). State law
controls the determination of this issue. Janiga v. Questar Capital Corp., 615 F.3d
735, 742 (7th Cir. 2010). Under Missouri law, an enforceable contract requires an
offer, acceptance, and consideration. Beck v. Shrum, 18 S.W.3d 8, 10 (Mo. Ct. App.
2000).1
In their complaint, Plaintiffs allege that Cerner “provided its services to UDVC
and SJDVC pursuant to oral and/written contracts with UDVC,” and claim that
Cerner breached those contracts. (Compl. at ¶¶ 40, 43–45). Plaintiffs attach to their
complaint “[d]ocuments purporting to represent the contracts signed by UDVC for its
new Cerner medical practice system for UDVC and SJDVC,” but deny those
documents were valid and enforceable contracts between the parties. (Id. ¶ 21). A
plaintiff claiming breach of contract is not generally required to attach the operative
1 Although the parties do not address choice of law, the 2009 Agreement provides that
Missouri law governs disputes arising from therefrom.
contract to a complaint. See Glen Flora Dental Ctr., Ltd. v. First Eagle Bank, 487 F.
Supp. 3d 722, 740 (N.D. Ill. 2020).
Attached to Cerner’s motion are: (1) a Cerner Software License, Hardware
Purchase, Services and Support Agreement between Cerner and St. Joseph
Dermatology, signed and dated August 3, 2009 (2009 Agreement) (Dkt. 13, Exh. A);
and (2) a General Addendum between Cerner and University Dermatology and Vein
Clinic LLC, dated December 6, 2016 (2016 Addendum). (Id., Exh. B).2 The 2009
Agreement contains the following mandatory arbitration provision in paragraph 16:
ARBITRATION. In the event of a dispute between the parties,
PowerWorks [Cerner] and Client agree to work cooperatively to resolve
the dispute amicably at appropriate, mutually determined management
levels. In the event that a resolution at such management levels does
not occur and a party wishes to escalate to a formal dispute resolution
forum, such party will submit the dispute to binding arbitration at a site
in the state of the principal place of business of the non-petitioning party
under the then-prevailing rules of the American Arbitration Association,
Inc., a New York Corporation. . . .
(Id., Exh. A). The 2016 Addendum “incorporate[s], by reference [the 2009
Agreement].” (Id., Exh. B). Here, the question is whether the 2009 Service Agreement
and the 2016 Addendum attached to Cerner’s motion establish an enforceable
arbitration agreement between the parties.
In challenging the enforceability of the arbitration agreement, Plaintiffs argue
that: (1) Cerner failed to attach affidavits to its motion regarding the 2009 Agreement
and 2016 Addendum; (2) the 2009 Agreement, signed by Brown, not Dimitropoulos,
was executed by a person no longer an owner of the company (and not a party to this
2 Brown signed the 2009 Agreement on behalf of St. Joseph, and Dimitropoulos signed the
2016 Addendum on behalf of UDVC.
lawsuit); (3) the 2016 Addendum, signed by UDVC, does not “redefine[] ‘Client’ in the
context of the 2009 Agreement”; and (4) the 2016 Addendum is not signed by Cerner.
The first challenge is dispositive of this motion.
Plaintiffs argue that Cerner failed to provide affidavits to substantiate that the
2009 Agreement and 2016 Addendum are enforceable. A party seeking to enforce an
arbitration agreement must authenticate the agreement, though the bar “is not high”.
Pearson v. United Debt Holdings, LLC, 123 F. Supp. 3d 1070, 1073 (N.D. Ill. 2015).
Federal Rule of Evidence 901 applies. Id. That rule states: “[t]o satisfy the
requirement of authenticating or identifying an item of evidence, the proponent must
produce evidence sufficient to support a finding that the item is what the proponent
claims it is.” Fed. R. Evid. 901.
Here Plaintiffs attached certain documents to its complaint, but those documents
did not contain either the 2009 Agreement or the 2016 Addendum, and Plaintiffs
expressly deny that a valid contract exists between the parties (in seeming
contradiction to their assertion of an oral and/or written breach of contract claim). In
moving to dismiss, Cerner attached the 2009 Agreement and 2016 Addendum
containing the arbitration provision but did not authenticate those documents with
an affidavit or declaration. [10, 11, 13]. As the court in Pearson explained “[d]istrict
courts routinely consider agreements containing arbitrations provisions referred to
within, but not attached to, the complaint, but only if the proponent of arbitration
properly authenticates the document containing an arbitration provision through an
affidavit or otherwise.” 123 F. Supp. 3d at 1073 (emphasis added). Even though
Plaintiffs raised this issue in their response brief, Cerner did not address the
argument or supplement the record with an affidavit authenticating the documents
in reply. [19]. Cf. Giuliano as Tr. for RIH Acquisitions NJ, LLC v. Sci. Games Corp.,
No. 20-CV-05262, 2022 WL 1591651, at *4 (N.D. Ill. May 19, 2022) (the existence and
authenticity of the agreements were established because the record “contain[ed] an
affidavit by someone who witnessed the signing of the agreements, a copy of the
signed agreements, the agreements’ full arbitration clauses, and a self-authenticating
contract”). Thus, based on the current record, the Court cannot find that a valid
agreement to arbitration exists among the parties.
Cerner argues that the arbitration agreement should be deemed part of Plaintiff’s
pleading because the parties’ agreements “are referred to in Plaintiffs’ complaint and
are central to Plaintiffs’ claims.” (Dkt. 19 at 3). As an initial matter, this argument
was raised only in Cerner’s reply brief and therefore is waived. See, e.g., Carroll v.
Lynch, 698 F.3d 561, 564 n.2 (7th Cir. 2012). Regardless, it is Cerner’s burden to
demonstrate that a valid arbitration agreement exists. A.D., 885 F.3d at 1060.
Because Plaintiffs’ complaint did not attach any documents showing the existence of
such an agreement, the law required Cerner to come forth with evidence
authenticating the arbitration agreements it seeks to enforce against Plaintiffs.
Because Cerner has not done so, it has failed meet its initial burden on its motion to
dismiss based on an arbitration agreement.
Because the Court is denying Cerner’s motion, Plaintiffs’ motion [24] is denied
without prejudice as moot.
IV. Conclusion
For the stated reasons, Cerner’s motion [10] is denied without prejudice. Plaintiffs’
motion for reconsideration regarding the order on motion for leave to file and to strike
[24] is denied without prejudice as moot.
ENTER:
Dated: August 26, 2022 Marg [Vi bo L/
MARY M. ROWLAND
United States District Judge
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